THERE is a building in New Jersey that contains more than 100 lavatories,
arranged row upon row in a single room.
In Ludwigshafen, Germany, a collection of dishwashers – machines from Europe,
America, Japan, Korea, Australia and many other places besides – are
assembled under one roof. Just outside Venice is a similarly comprehensive
array of washing machines.
Why? Because, according to Bart Becht, Dutch boss of Reckitt Benckiser,
consumers are not very good at imagining what they might want to buy if it
were available. They may have a strong view on what works well when they are
doing humdrum jobs round the house, but they cannot imagine what might do it
better. “Consumers are not very innovative,” said Becht.
But Reckitt Benckiser does innovation in spades – and it needs those rows of
lavatories, washing machines and dishwashers to test for what’s going to be
the next big thing. Its range of household staples – from Finish dishwasher
tablets and Vanish stain remover to Strepsils throat lozenges and Nurofen
pain relief – are scarcely the sort of things that set the pulse
racing. But the company, which last week reported 2007 profits of £1.2
billion, has shown a remarkable capacity for inventing things that people
didn’t even realise they wanted to buy.
Air fresheners that automatically give a burst of fragrance every 20 minutes?
They are already in danger of becoming old hat. Reckitt Benckiser has come
up with an Airwick device that allows people to select different scents –
lavender one burst, lemon the next, for example.
And did you realise that you find it a real hassle to unwrap a dishwasher
tablet? Well, Reckitt Benckiser is confident you will like the convenience
of its new tablet, which you can put in the machine whole, wrapping and all,
when you load up the dishes.
Since its creation in 1999 by the merger of Britain’s Reckitt &
Colman – a firm with roots in making starch and mustard – and
Benckiser of the Netherlands, the company has undoubtedly been successful.
Profits have almost doubled in the past four years. The share price has more
than quadrupled since the start of the millennium.
And in its quiet, determined way, Reckitt Benckiser has shown an unrivalled
aptitude for thinking up new products that people never knew they wanted.
So where do the ideas come from? “Consumers will generally not come up with
the next innovation,” said Becht. “So we try to have ideas that target
consumers in specific areas. Then we screen them. We go through literally
thousands of ideas every quarter. Then we ask consumers about the ideas.”
This is done through focus groups, one-to-one interviews and even by
installing company employees in people’s homes to see how they go about
their household chores. “We literally say to people, ‘show me how you do the
dishes; tell me how you clean the floors’.”
He added: “Of all the ideas, we pick the best ones and we do a feasibility
assessment and we pursue the ones where there’s high interest and a
reasonable chance of making the product.”
Dishwasher tablets are an example. The notion of having a tablet that
dispensed the different chemicals required for a wash at different times in
the machine cycle took “six or seven years” to develop, he said. Some of the
technology involved was borrowed from the pharmaceuticals industry –
decades earlier it had developed pills that contained more than one
ingredient, but which were absorbed into the body at different times.
“We’ll look at ideas from anywhere. Some come from our competitors: we see if
they are doing something new and see if we can do it better. We’re not
proud,” said Becht.
And the company’s relentless quest to find something new is illustrated by a
simple but striking statistic: of all its sales, between 35% and 40% come
from products launched in the past three years. A second striking statistic:
to ensure that consumers know about these new products, Reckitt Benckiser
spends more than 12% of its entire revenues on marketing – many of its
competitors spend barely half of that proportion.
It is now two years since Reckitt Benckiser completed its £1.9 billion
purchase of Boots Healthcare International, which gave the company brands
such as Strepsils and Nurofen. Reckitt Benckiser has extracted the planned
gains – both in terms of sales and costs – well ahead of schedule.
“BHI was an averagely run business with a poor international structure and
low investment, so we were able to bring some value to it,” said Becht.
And now the company has just tied up the £1.1 billion takeover of Adams
Respiratory Therapeutics, an American pharmaceuticals company. The price
being paid represents an eyewatering 35-times Adams’s expected earnings for
the year.
So what can Reckitt Benckiser bring to the party? At the moment, Adams’s main
product is a cough treatment whose effects last far longer than those of its
competitors. But until now, its sales have been confined to America. Reckitt
Benckiser reckons that with a following wind – and subject to clearance
by drugs regulators – it should be able to start launching the medicine
in Europe from 2010.
It aims to double global sales by 2012 – and double profit margins to
more than 30%. Becht said: “In looking for acquisitions, we always ask what
can we add to the business that the current owner cannot.” In the case of
Adams, it’s an international infrastructure.
The buzz phrase, never omitted from any Reckitt Benckiser presentation is
“power brands”. At the moment there are 18 – the best-known
in Britain being Veet hair remover, Dettol, Nurofen, Strepsils, Calgon,
Vanish, Woolite, Cillit Bang surface cleaner, Harpic, Finish, Airwick,
Lemsip and Gaviscon. The purchase of Adams’s Mucinex will give it a 19th. So
will one drop off the list? Becht isn’t saying, but Lemsip is reckoned to be
a candidate. Will it go?
Becht replied carefully: “We will have a session to reevaluate our power
brands, probably in May. Lemsip is one of the smallest ones. There is no
decision made.”
The company is not looking for huge acquisitions. But Becht admits that “we
still don’t have critical mass in Asia”. More than half of the company’s
sales are in Europe. North America and Australia account for 28%. But those
developed markets are likely to be responsible for most of the company’s
sales growth in the foreseeable future as Reckitt Benckiser dreams up yet
more products that householders don’t even realise they need or want.
Which brings Becht, 51, back to those rows of lavatories at the company’s
research and development centre in New Jersey. “The way a toilet flushes in
America is different from the way a European one does. And that means we
have to change the design of rim blocks according to the market,” he said.
“All the time, we are very much trying to experiment. We have fun with
experimentation. It is very hard for people who aren’t working on household
cleaners or health or personal care to understand that you can get genuinely
excited about our products. But we do.”
STUPID IDEAS
IT came dangerously close to being Bart Becht’s Gerald Ratner moment. As
he was telling journalists about Reckitt Benckiser’s results last week,
Becht described some of the innovations being introduced by the company as
“stupid products, stupid ideas”.
He didn’t get as badly into the mire as Ratner famously did in 1991 when he
described some of his products as “total crap”. Ratner was then at the
height of his fame as a jeweller.
But Becht was soon backpedalling furiously, insisting that what he really
meant was that some of Reckitt’s innovations were simple –
blindingly obvious in their usefulness.
